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October 30, 2012

This published opinion (Fullington v. Equilon Enterprises) addresses an issue of first impression in California law: whether a plaintiff can pursue a tort claim solely for the purpose of punitive damages, when the plaintiff has already been compensated for the alleged loss caused by the tort.

The plaintiff, who leased and operated a Shell gas station, brought several lawsuits against Shell. In one of those cases (the Marquez litigation), he claimed that Shell failed to offer him an opportunity to purchase his station before Shell transferred ownership of the station to another company. He accepted a settlement with Shell in which Shell agreed to refund all the rent that plaintiff paid on his gas station from 1998 through 2001.

In the instant case, he brought a fraud claim against Shell for overcharging him on rent from 1998 through 2000. The trial court granted summary adjudication on the fraud claim, finding that plaintiff could not establish any damage because he had already received a complete refund of all rent in the Marquez action. The plaintiff appealed, arguing that he should be allowed to pursue the fraud claim for the purpose of obtaining punitive damages. While a plaintiff cannot ordinarily obtain punitive damages in the absence of compensatory damages, the plaintiff argued that what matters is whether he suffered a compensable injury, regardless of whether he was already compensated for that injury through another lawsuit.

The California Court of Appeal (Second District, Division Four) agreed with the plaintiff and reversed the grant of summary adjudication on the fraud claim. The court held on October 25 that a defendant cannot avoid an award of punitive damages by paying the plaintiff for his alleged injuries. The court noted that “California law has a variety of doctrines—none of which [defendant] invoked here—that prohibit the filing of multiple suits arising out of the same wrongful conduct. If none of those doctrines applies—and thus the filing of two separate actions does not offend California law—we perceive no reason why the maintenance of one action should become impermissible because a judgment or settlement is entered in the other."